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A70
Guardian www.guardian.co.tt Monday, December 30, 2013
2.6 I
(a) Financial assets carried at amortised cost
The Company assesses at each reporting date whether there is objective evidence that a
financial asset or a group of financial assets is impaired. A financial asset or group of
financial assets is impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that have occurred after the ini-
tial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on
the estimated future cash flows of the financial asset or group of financial assets that can
be reliably estimated.
The criteria that the Company uses to determine that there is objective evidence of an
impairment loss include:
(i) significant financial difficulty of the issuer or debtor;
(ii) a breach of contract, such as default or delinquency in payments;
(iii) the lender, for economic or legal reasons relating to the borrower's financial difficulty,
granting to the borrower a concession that the lender would not otherwise consider;
(iv) it becoming probable that the issuer or debtor will enter bankruptcy or other financial
re-organisation;
(v) the disappearance of an active market for that financial asset because of financial
difficulties; or
(vi) observable data indicating that there is a measurable decrease in the estimated future
cash flows from a group of individual assets since the initial recognition of those
assets, although the decrease cannot yet be identified with the individual financial
assets in the group, including:
- adverse changes in the payment status of issuers or debtors in the group; or
- national or local economic conditions that correlate with defaults on assets in the group.
The Company first assesses whether objective evidence of impairment exists individually
for financial assets that are individually significant, and individually or collectively for
financial assets that are not individually significant. If the Company determines that no
objective evidence of impairment exists for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets with similar
credit risk characteristics and collectively assesses it for impairment. Assets that are indi-
vidually assessed for impairment and for which an impairment loss is or continues to be
recognised are not included in a collective assessment of impairment.
The amount of the loss is measured as the difference between the asset's carrying amount
and the present value of estimated future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial asset's original effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and
the amount of the loss is recognised in the statement of comprehensive income. If a loan
or held-to-maturity financial asset has a variable interest rate, the discount rate for meas-
uring any impairment loss is the current effective interest rate determined under the con-
tract. As a practical expedient, the Company may measure impairment on the basis of an
instrument's fair value using an observable market price.
The calculation of the present value of the estimated future cash flows of a collateralised
financial asset reflects the cash flows that may result from foreclosure less costs for obtain-
ing and selling the collateral, whether or not foreclosure is probable.
For the purpose of a collective evaluation of impairment, financial assets are grouped
together on the basis of similar credit risk characteristics. Those characteristics are relevant
to the estimation of future cash flows for groups of such assets by being indicative of the
debtors' ability to pay all amounts due according to the contractual terms of the assets
being evaluated.
When a loan is uncollectible, it is written off against the related provision for impairment
loss. Such financial assets are written off after all the necessary procedures have been
completed and the amount of the loss has been determined.
If in the subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised (such
as an improved credit rating), the previously recognised impairment loss is reversed by
adjusting the allowance account. The amount of the reversal is recognised in the statement
of comprehensive income in the impairment charge for credit losses.
(b) Financial assets carried at fair value
The Company assesses at each reporting date whether there is objective evidence that a
financial asset or a group of financial assets is impaired. A financial asset or a group of
financial assets carried at fair value is impaired if its carrying amount is greater than its
estimated recoverable amount based on the present value of expected future cash flows
discounted at the current market rate of interest. If any such evidence exists for available-
for-sale financial assets, the cumulative loss measured as the difference between the acqui-
sition cost and the current fair value, less any impairment loss on that financial asset pre-
viously recognised in other comprehensive income is removed and is recognised in the
statement of comprehensive income. If in a subsequent period, the fair value of a financial
asset classified as available-for-sale increases and the increase can be objectively related
to an event occurring after the impairment loss was recognised in the statement of com-
prehensive income, the impairment loss is reversed through the statement of comprehen-
sive income.
(c) Renegotiated loans
Where possible, the Company seeks to restructure loans rather than to take possession of
collateral. This may involve extending the payment arrangements and the agreement of
new loan conditions. Once the terms have been renegotiated, the loan is no longer con-
sidered past due. Management continuously reviews renegotiated loans to ensure that all
criteria are met and that future payments are likely to occur.
2.7
Financial assets and liabilities are offset and the net amount reported in the statement of finan-
cial position where there is a legally enforceable right to set off the recognised amounts and there
is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
2.8
Property, plant and equipment are stated at historical cost less depreciation. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Company and the cost of the item can be measured reliably. The car-
rying amount of the replaced part is de-recognised. All other repairs and maintenance are
charged to the statement of comprehensive income during the financial period in which they
are incurred.
Depreciation is calculated using the reducing balance method to allocate their cost to their
residual values over their estimated useful lives, as follows:
Leasehold improvements
-
over the life of the lease
Computer software and equipment -
20% - 33 1/3%
Furniture and equipment
-
10% - 15%
Motor vehicles
-
25%
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each
statement of financial position date. An asset's carrying amount is written down immediately
to its recoverable amount if the asset's carrying amount is greater than its estimated recover-
able amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying
amount and are recognised within net trading gain/loss in the statement of comprehensive
income.
2.9
i
Where the Company has the power to participate in (but not control) the financial and oper-
ating policy decisions of another entity, it is classified as an associate. Associates are initial-
ly recognised in the statement of financial position at cost. The Company's share of post-
acquisition profits and losses is recognised in the statement of comprehensive income, except
that losses in excess of the Company's investment in the associate are not recognised unless
there is an obligation to make good those losses.
Profits and losses arising on transactions between the Company and its associates are recog-
nised only to the extent of unrelated investors' interests in the associate. The investor's share
in the associate's profits and losses resulting from these transactions are eliminated against the
carrying value of the associate.
Any premium paid for an associate above the fair value of the Company's share of the iden-
tifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the
carrying amount of the associate. Where there is objective evidence that the investment in an
associate has been impaired the carrying amount of the investment is tested for impairment in
the same way as other non-financial assets.
Issued shares are classified as equity when there is no obligation to transfer cash or other
assets. Incremental costs directly attributable to the issue of equity instruments are shown in
equity as a deduction from the proceeds, net of tax. Incremental costs directly attributable to
the issue of equity instruments as consideration for the acquisition of a business are included
in the cost of acquisition.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings
are subsequently stated at amortised cost; any difference between the proceeds (net of trans-
action costs) and the redemption value is recognised in the statement of comprehensive income
in the period of the borrowings using the effective interest method.
Provisions are recognised when the Company has a present legal or constructive obligation
as a result of past events, it is probable that an outflow of resources embodying economic ben-
efits will be required to settle the obligation and a reliable estimate of the amount of the obli-
gation can be made. Where there are a number of similar obligations, the likelihood that an
outflow will be required in settlement is determined by considering the class of obligation as
a whole. A provision is recognised even if the likelihood of an outflow with respect to any one
item included in the same class of obligations may be small.
(a) Current income tax
Income tax payable (receivable) is calculated on the basis of the applicable tax law in
Trinidad and Tobago and is recognised as an expense (income) for the period except to
the extent that current tax related to items that are charged or credited in other compre-
hensive income or directly to equity. In these circumstances, current tax is charged or cred-
ited to other comprehensive income or to equity (for example, current tax on unrealised
gains on available-for-sale investment).
(b) Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differ-
ences arising between the tax bases of assets and liabilities and their carrying amounts in
the financial statements. Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the statement of financial position date and
are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
The principal temporary differences arise from accelerated tax depreciation, revaluation
of financial assets and tax losses carried forward.
Deferred tax assets are recognised where it is probable that future taxable profit will be
available against which the temporary differences can be utilised.